Indepent film distribution

Strangers and Aliens recently interviewed Ryan Dunlap in Episode 51. (Thanks for doing that interview, Ben!) The interview sparked thoughts that I've had before and I'm hoping some of you can offer insight and answer some questions I have.

Ryan has made a movie called Greyscale which sounds like a pretty interesting movie to me; I'd definitely rent it. However the movie has not been released yet and is currently seeking a distributor. This is not the first independent movie that has attracted my attention but had the same problem of distribution - 95ers comes to mind. If anyone could point Ryan or James Durham to this post to maybe help offer some insight to some of these questions I'd appreciate it.

I am going to show my ignorance here, but so be it. In my simple mind, I am wondering about two options that seem obvious to me. #1: What about just distributing it yourself? and #2 What about Netflix (or Hulu, Amazon, YouTube, Google Play, iTunes, etc.)?

#1: Self-distribution seems so easy and obvious to me that I must be missing something. The cynical part of me thinks that the movie industry and "the system" is so old and bogged down in "that's the way it's always been done" that people have to (or at least think they have to) go through certain steps in order to release anything successfully. Why not just sell the movie directly from your film's web site? And why not sell rentals to be able to stream it directly from your web site?

Let's assume Greyscale cost $1 million to produce (the cost posted on IMDB). Charging $15 per DVD/Blu-ray/Streamed purchase you need to sell 66,667 units to break even. I'm sure this is where my ignorance will shine, but while I admit that's quite a number to be able to stir up all by yourself, it still seems attainable to me. Add in the number of people willing to rent a stream of it for $3 and that sales number goes down.

#2: I'm pretty sure the problem is not the technology. So I have to think the problem is attaining that 66,667 audience and getting the word out...which is where the distributor comes in. In my mind, this would be an amazing opportunity for Netflix. (I'm going to use Netflix as an example, but you can insert your own favorite online movie streaming service.)

I'm going to just throw some numbers out there not really worrying too much about the math. However ultimately comes down to the math because that's how everyone makes money. My point is that in my thinking, you could approach Netflix and work out a mutually beneficial agreement. And ultimately, why do you need a distributor for anything other than a theater release?

One possibility could be a metered deal in which they pay you per view; for example, Netflix would pay $.01 per minute viewed so you would get $1.20 for a full 2-hour movie. I am sure Netflix has the tools to be able to tell exactly what is watched, how much of it is watched, etc. I think Netflix could do this for just a little cost to them (the cost of encoding the movie and adding it to their database) and would only have to pay for movies that are actually drawing viewers. It would put your movie out there to a huge audience in an easily-consumed streamed format. Their database has ways multiple ways to find your movie like categories, searching, find similar movies, etc. One problem with this is there's no real way to audit this; you would have to trust Netflix's numbers.

Another possibility could be just "lease" the movie to Netflix. This would be an agreement in which Netflix gets to show the movie to an unlimited number of viewers for a per-determined amount of time. An example would be Netflix gives you $200,000 to be able to show the movie for a year to an unlimited number of viewers.

With either possibility you would be able to make a similar deal with the other streaming providers, be able to do multiple years, etc. in order to make the full $1 million back *in addition* to sales/rentals from #1 above.

I mentioned the math and maybe that's the whole part I'm missing. Maybe the math just doesn't add up. In one way, with the expense of making a quality movie, I can see that. But in this day of the cost of production going down due to technology being more accessible, and technology enabling any schmoo to be able to post a video to YouTube I can't help but think there's a way to do this better. Like by cutting out a middle man. Or three.

One of the reasons that producers use "middle-men" (aka. distributors) is because of the efficiency and reach these distributors provide. A producer typically sells a product to the distributor at a 50% discount, with the price set at 4x cost of production. In the case of your $15 movie, the studio makes the disc for $3.75/unit, sells it to the distributor for $7/unit, who sells it to the retailer for $10.75, who sells it to you for $15. Every purchase nets the studio $3.75 in revenue. At a cost of $1M, this movie will have to sell 267,000 units in order to break even. With profit goals of a small studio set at 15%, it needs to sell a total of 307,000 units in order to be profitable.

Major studio releases with a proper advertising budget sell an average of 50,000 units per week, with an average shelf life of 6 weeks, for a total of 300,000 units sold per title. Check out The Numbers.

Digital numbers are a little harder to come by. According to Bloomberg, digital sales revenue generates between 11% - 15% of the revenue generated by physical product sales, or $45,000. Read the TechSpot article.

Assuming generous numbers, your $1M independent movie will generate $1.3M in revenue. With a conservative return rate of 10%, your final profit realized on the film over a period of 6 months production and 3 months digital and DVD distribution is $170,000, almost exactly 15% of the $1,125,000 initial investment. It's not a bad return if you can tolerate the risk, which for a small studio is 10x - 20x the risk of a comparable investment in the stock market.

Distribution is seeing a major paradigm shift, like every other corner of entertainment media, because no one knows how to make money!

The playing field is more even, now. People can get their movie on netflix or get their book on Kindle, but that does not automatically mean money. Not yet. It DOES mean exposure, but if people can watch for free . . . why would they pay for it? Answer? They probably wouldn't.

So enter someone like Ryan, who has investors put money into the film, who has created a quality film, but who also has to consider the investors as he looks for ways to get people to see the movie. He needs to make sure he is honoring the investment by making good choices that will bring in a return on the investment. It's a tough spot to be in as the options are weighed.